Ping An dismisses Jahwa chair

Cosmetics maker Shanghai Jahwa Group Co's listed unit on Tuesday rebuffed allegations from its controlling shareholder China Ping An Trust Co, which claimed some group executives had been involved in embezzlement and removed Ge Wenyao from the position of chairman of the group.

Jahwa held a board meeting Saturday where shareholders decided to dismiss Ge from the post of chairman and general manager of the group.

Zhang Liqing, deputy general manager of Ping An Trust, is the new chairman of the cosmetics group, Ping An Trust said in a statement Monday.

Ping An Trust, the trust unit of China's second largest life insurer Ping An Insurance, has received tip-offs since March from Jahwa employees who claimed the group's management had set up unauthorized accounts and coffers. Some executives embezzled funds and seized interest earned by the group which should have been shared by retired employees, the statement said. It further noted that a huge amount of money was involved, and that the cases are currently under investigation.

Jahwa's response

The statement came after Ge complained on Sina Weibo earlier Monday that "Jahwa is suffering from a political disturbance" and "Ping An has continually sold assets of Jahwa after the acquisition."

Ping An Trust bought State-owned Shanghai Jahwa Group in a deal valued at 5.1 billion yuan ($830 million) in November 2011. After the acquisition, Ping An also became the controlling shareholder of Jahwa's Shanghai-listed unit.

Jahwa's listed unit responded in a statement Tuesday that the company offers senior management bonuses to motivate them, but Ge's salary and bonus are in accordance with company rules and he has not received any extra money from the firm.

"Ge is still the chairman of Jahwa's listed unit, and our operation has not been affected by the incident," Xu Aiping, a PR employee with the Shanghai-listed company, told the Global Times Tuesday.

"The local government asked both sides to calm down for a while," Xu said, declining to say more about the issue. But she noted that Jahwa's listed unit will hold a shareholder meeting on Thursday, when more information is expected to be released.

The State-owned Assets Supervision and Administration Commission of Shanghai Municipal Government has stepped in to investigate the issue, financial news website eeo.com.cn reported Tuesday. However, questions sent to the commission by the Global Times went unanswered by press time Tuesday.

Jahwa shares fell by 5.3 percent to close at 69.99 yuan on the Shanghai Stock Exchange in Monday trading. The company suspended trading Tuesday, but announced that its shares will resume trading from Wednesday, as the incident in the group has not affected the listed firm's business.

SOE restructuring

Ping An's acquisition of Jahwa was once seen as a model case of China's reform of State-owned enterprises (SOEs).

Jahwa, which owns cosmetics brands such as Maxam and Herborist, has been facing increasing competition from foreign cosmetics giants such as L'Oreal and Procter & Gamble. In order to help Jahwa better compete, the Shanghai government put the State-owned group up for sale in September 2011.

Two months later, Ping An Trust finally outbid others including HNA Group, the parent of Hainan Airlines Co, to buy out Jahwa.

Ping An Trust promised to inject 7 billion yuan into Jahwa over the next five years, aiming to boost Jahwa's sales to more than 16 billion yuan by 2015. It also vowed to help Jahwa acquire three to four high-end consumer brands and expand into new businesses such as jewelry and watches.

But the conflict between Jahwa and Ping An began to emerge on a potential investment project last year.

Ge tried to persuade Ping An to invest in Chinese watch brand Sea-Gull and had ambitions to build the watch brand into a luxury one over 10 years. But following a shareholder meeting on December 18, Ge admitted that Ping An Trust did not agree with his investment plan.

Since the investment was shelved, Ge has expressed his dissatisfaction with Ping An on his Sina Weibo account, saying Ping An has put too much pressure on him.

"Ping An's management focuses more on short-term profits, while Ge aims to build Jawha into a world-class fashion group. Their different ideas about company development have led to the intensification of the conflict," Zhu Boshan, general manager of Shanghai Tacter Investment Consulting, told the Global Times Tuesday.